Marketplace Scratch Pad

Morning Reading

Scott Jagow Jun 12, 2009

Wanna know who’s hiring? The federal government, that’s who. The Washington Post points out that the $787 stimulus package includes lots of money for administering the stimulus. So far, most of the jobs being created are the jobs to oversee the creation of jobs. Make sense?

From the Post:

The Health Resources and Services Administration has hired 134 people to oversee $2.5 billion in spending and has spent $326,000 on new workstations at its Rockville offices…

And the Transportation Department plans to hire two people at its headquarters to help estimate the number of jobs being created by transportation infrastructure spending. This is despite job estimates that will be provided by the states.

But Washington isn’t exactly drowning in unemployment to begin with:

At one level, even spending on administrative overhead meets the most basic purpose of the package: to get money into the economy. But of the areas that most need a boost, greater Washington is pretty much at the bottom of the list. While unemployment rises elsewhere, it has declined in the region for the past two months, to 5.6 percent, the lowest of any major metro area.

Washington is getting a big benefit as it is — the stimulus package includes billions to erect and refurbish federal buildings, most notably $448 million for a new complex for the Homeland Security Department. But the legislation’s effect on the bureaucracy probably will be the biggest boon. The region has already added 9,000 government jobs compared with a year ago.

Elsewhere, writing in Vanity Fair, Nobel Laureate Joseph Stiglitz reminds us that the debate still rages in developing countries — socialism or capitalism? What’s happened in the United States is a huge black mark on the latter. Stiglitz says the last straw for Third World countries is seeing how the US has responded to this financial crisis versus how it reacted to the Asian financial crisis a decade ago:

America and the I.M.F. forced countries to raise interest rates, in some cases to more than 50 percent. They lectured Indonesia about being tough on its banks–and demanded that the government not bail them out. What a terrible precedent this would set, they said, and what a terrible intervention in the Swiss-clock mechanisms of the free market.

The contrast between the handling of the East Asia crisis and the American crisis is stark and has not gone unnoticed. To pull America out of the hole, we are now witnessing massive increases in spending and massive deficits, even as interest rates have been brought down to zero. Banks are being bailed out right and left. Some of the same officials in Washington who dealt with the East Asia crisis are now managing the response to the American crisis. Why, people in the Third World ask, is the United States administering different medicine to itself?

GM is getting plenty of medicine, but President Obama has promised that Doctor Government will take a “hands off” approach to GM’s treatment. An op-ed piece in the Wall Street Journal says the interference has already started:

Last week, Rep. Barney Frank (D., Mass.) contacted General Motors CEO Fritz Henderson. He wasn’t happy with GM’s decision to close a distribution center in his district. He asked Mr. Henderson to reconsider.

Mr. Frank controls the funds upon which GM’s survival depends. His request was immediately approved, and the facility will stay open for at least another 14 months.

When Michigan’s congressional delegation learned of the stay, they called Mr. Henderson and asked for a meeting. They are equally determined to strong-arm GM into arranging a similar stay of execution for GM facilities in their districts…

Even Sen. Bob Corker (R., Tenn.), who upbraided the Big Three CEOs at hearings last November, is now working to save GM’s Spring Hill plant from permanent closure.

But the New York Times points out that GM’s new chairman, former AT&T CEO Edward Whitacre, is a long-time Republican:

The appointment of Mr. Whitacre, who has no experience running a car company, may be seen as a peace offering to Republicans, many of whom profess outrage over the way the Democratic administration has handled the General Motors bailout and bankruptcy. The appointment of such a staunch conservative Republican may also mean that G.M. won’t carry the moniker “Government Motors” forever.

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